Disco Corporation

Q1 shipments were JPY111.1 billion, a record high for the quarter and above external forecast. The company said the forecast increase versus prior guidance was about JPY9 billion, with more than JPY5 billion from machinery/equipment and about JPY3 billion from other products; some projects were pulled forward from Q2 and some evaluation machines were shipped unexpectedly in Q1. Gross profit margin in April-June (Q1) was 68.1%, and management said it would have been approximately 70% if the yen had been at the prior-year JPY158/USD rate rather than JPY144/USD. For July-September (Q2), management expects gross margin to decline by less than 2 percentage points from Q1, mainly because of FX; SG&A is expected to be about JPY27 billion. On mix, Q1 memory was just over 40%, OSAT was 30%, and power semiconductors were less than 10%; Q2 memory is expected to be 35%, OSAT about 30%, and power semiconductors under 10%. Management said Q2 shipments should decline versus Q1 due to timing, with no sign yet of a broad slowdown in generative-AI demand.

Koba characterized Q1 as unusually strong, led by generative-AI-related IC demand, especially memory/HBM and OSAT, while non-IC demand such as power semiconductors remained soft. He said the Q2 outlook is mostly a timing reversal after concentrated Q1 shipments rather than a demand collapse, and he does not expect a “slow decline” in shipments. Looking into H2, he said Q3 looks somewhat more positive than Q2, but Q4 is still hard to forecast because of unstable project timing and shorter customer planning horizons.

Suzuki said the 68.1% Q1 gross margin was lower year over year mainly because of currency, citing JPY144/USD versus JPY158/USD last year and estimating margin would have been about 70% at the prior-year FX rate. For Q2, gross margin is expected to be down by less than 2 percentage points from Q1, again mainly due to FX, with the company budgeting at JPY135/USD. He also guided July-September SG&A to about JPY27 billion, noting the bonus reserve is now tied to shipment levels and that internal timing adjustments can shift expenses between quarters.

Analysts pressed for visibility on Q2, H2, and whether tariffs or customer behavior were changing shipment timing. Management said some Q1 shipments were pulled forward from Q2, but the projects were varied and scattered by region and application, and tariff effects are not yet clear; North America is only about 10% of projects so direct impact may be limited. On H2, management said Q3 should be a bit stronger than Q2, but Q4 remains unstable; they also said customer behavior is reverting to shorter lead times and less early forecasting than during the COVID/power-semi boom. Questions on hybrid bonding, NAND, WMCM, and PLP drew a cautious answer: NAND bonding is progressing, PLP customer discussions are increasing, but none of these are yet contributing meaningful volume.